Why should I setup a Body Corporate?

Discussion in 'Development' started by Ruan de Witt, 28th Nov, 2019.

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  1. Ruan de Witt

    Ruan de Witt Member

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    Hi, I've just completed a 6 unit development and build in metro east of Melbourne. Right now I still own all 6 with 2 up for sale and 4 up for rent (I'll keep those). The general momentum is to setup a body corporate. I've spoken to a body corporate broker who has given me some quotes however I'm not sure I really understand why I need to set up a body corporate.

    Could someone please explain to me what exactly a body corporate group will do? I've already taken out an insurance policy for the block of units and have managed liability insurance in a previous development site with a few E-mails per year. What are the real benefits / draw backs?

    Thanks :)
     
  2. The Y-man

    The Y-man Moderator Staff Member

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    Gets created auto-magically

    Plan of subdivision
    An owners corporation is automatically created when a plan of subdivision containing common property is registered at Land Use Victoria. Land Use Victoria registers and records owners corporation applications received either with a plan of subdivision, or lodged following registration of the plan of subdivision.

    What is an owners corporation?

    Whether it is activated or not is a totally different kettle of fish.

    The Y-man
     
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  3. Scott No Mates

    Scott No Mates Well-Known Member

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    You will have two other owners to deal with and they would like a say - you don't necessarily need to appoint a strata manager but it will mean that more time will need to be devoted to it. If the purchasers are going to be absentee landlords, then they may want more/less involvement.
     
  4. thatbum

    thatbum Well-Known Member

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    "Because you have to."
     
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  5. thydzik

    thydzik Well-Known Member

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    When you strata title the units, they now create and forms part of the body corporate.

    I think you are referring to strata management, not sure about VIC, but in WA it's is not a requirement. You still need to meet all the body corporate requirements, like meetings, etc.

    What name is on the insurance policy? it should show something like The owners of XXXXX, which refers to the body corp.
     
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  6. The Y-man

    The Y-man Moderator Staff Member

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    I haven't read up on the stuff but as far as I know, in Vic it can technically stay dormant. We have a 4 pack where it stayed dormant for ages but we and another owner wanted to get PL insurance for the common driveway so we got a quote and contacted the other owners.

    One other owner came to the party, but one refused.
    So at the moment, we split the insurance cost 3 ways.

    However, as I understand it, when it comes time to sell, the seller needs an OC cert - at which time we'll need to get a bit more serious. Actually, we should be getting serious right now (keeop saying this and never getting around to it :oops::oops::oops:) if we want to recover the money owed by the recalcitrant unit should they ever sell out.

    The Y-man
     
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  7. Paul@PAS

    [email protected] Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Its a legal obligation under state law. And you only just found that out ? :eek:

    The Body Corporate is legally responsible for the property on behalf of the owners. ie insurance, maintenance and so forth. It will create a sinking fund or more than one. It is a legally constituted entity.

    It may be semi-dormant but not ignored. A strata manager may assist this and guide the process and its ability to sleep for now.
     
  8. Ruan de Witt

    Ruan de Witt Member

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    Thanks @Scott No Mates that's basically the conclusion I've come to. I've put it to my broker to justify their work. Basically looks like they generate the OC certificates for sale and collect cash for insurance, maintenance etc.
     
  9. Ruan de Witt

    Ruan de Witt Member

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    @[email protected] the detail I'd not realised was that in Victoria an owners corporation is automatically generated upon submission of the plan of subdivision and, by definition, is a requirement (which is irrelevant since it requires no action from a developer). The discretionary component is self-managed vs. getting an external strata manager. The benefit with getting a strata manager is that they can ensure compliance of the OC commitments, collect money for insurances and coordinate maintenance. The downside is that you need to pay them - and the scales tip at a certain point the more units you retain.

    Thanks all - this has been some very helpful feedback. Looks like it's a judgement call from this point forward.
     
  10. Paul@PAS

    [email protected] Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Some of them are very basic and do little more than minimal compliance eg building insurance. Some builders sell down and leave nothing in the kitty if the units were rented and that can be deficient. What developer wants to pay ? The issue expands when other owners commence. No developer wants to deal with so many issues. Then you get into levies and sinking funds and the like and plan for maintenance etc. Thats when most move it to a paid manager.

    eg I like this simple to follow site Home - Strata Management Victoria
     

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